Wipro is not alone: Firing rises, hiring stalls as IT firms choose automation to protect margins

Wipro is not alone: Firing rises, hiring stalls as IT firms choose automation to protect margins

The multiple challenges being faced by India’s information technology companies have begun taking a toll on the employment prospects, with one of the largest organised employment sector cutting back on hiring or even undertaking retrenchment.

Yesterday, news reports said that India’s third-largest information technology service provider has sacked 300-600 employees to “align its workforce with business objectives, strategic priorities of the organisation and requirement of its clients”.

The multiple challenges being faced by India’s information technology companies have begun taking a toll on the employment prospects, with one of the largest organised employment sector cutting back on hiring or even undertaking retrenchment.

The most recent case in point being Wipro. Yesterday, news reports said that India’s third-largest information technology service provider has sacked 300-600 employees to “align its workforce with business objectives, strategic priorities of the organisation and requirement of its clients”.

The incident is emblematic of the quagmire of slowing growth and environmental difficulties that lay ahead of the Indian information technology companies.

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On one hand, reducing client spends and pricing pressures are squeezing margins of the companies. Earlier last week, India’s bellwether IT company Infosys offered a bleak outlook for the year ahead, with the full fiscal 2017-18 revenue growth guidance at 6.1-8.1% in dollar terms. Further, a rising rupee is putting more pressure on the earnings realisation of these companies, which earn a bulk of their revenues from the US.

On the other hand, the increasingly tougher visa regimes, with proposed restrictions on work visa norms by countries like the US, UK, Singapore and Australia, are making it more difficult for the companies to carry on their operations in these countries in a cost effective manner.

To cope up with the rapidly evolving landscape, Indian IT companies are investing heavily in automating processes in their traditional businesses such as BPO, application management and infrastructure management to improve operating margins.

This is leaving these companies with surplus manpower, as an increase in automation allows for fewer people – to be deployed only for advanced roles, as tedious tasks can be put on automation to improve efficiencies.

In the past one year, Infosys, the second-largest Indian IT company, has reportedly retrained and reassigned around 9,000 employees from low-end roles to more advanced roles. Further, it cut its hiring to just 5,700 people in the first nine months of 2016, compared to the 17,000 employees it hired in the previous year. In the December quarter, Infosys’s total employee strength actually declined – an extremely rare occurrence for it. The total strength fell by 66 to 199,763.

Similarly, Cognizant is also reportedly planning to lay off up to up to 10,000 employees globally. The New-Jersey based, NASDAQ-listed firm IT services company has a workforce of 1,55,000 employees in India. Cognizant competes directly with Indian IT firms with several of its delivery centres being run out of India.

Tech experts have been cited expressing concerns that proposed hyper-automation and Artificial Intelligence may paint an even bleaker future for the sector, as when implemented these would drastically reduce the need for human resources.